2 adjudication, where each party believes it

2 – General Synopsis of Arbitration

Arbitration is a private judicial
system of adjudication1,
whereby the parties who arbitrate have decided to resolve their disputes independent
of any judicial system. In most cases, arbitration comprises a definitive and binding
decision that is enforceable in a domestic court of law. Arbitration furnishes
the parties with extensive independence and power over the procedure that will
be utilised to resolve their disputes. This is predominantly vital in
international commercial arbitration because arbitration delivers a more impartial
medium of adjudication, where each party believes it will have a fair hearing
without the influence of either party’s jurisdiction, in accordance with the
arbitration agreement or clause. Furthermore, the versatility of being able to customise
the dispute resolution process to the requirements or desires of the parties,
and the opportunity to choose arbitrators who are experienced in the field of speciality
of the dispute, renders arbitration particularly attractive and has solidified
it as the norm for international dispute resolution.  A number of salient explanations exist as to why
arbitration is the favoured system for resolving international commercial
disputes, as opposed to litigation: in contemporary arbitration regulations,
the dispute can be arbitrated in an impartial third-party jurisdiction to which
neither party belongs, and as a consequence of the New York Convention
(heretofore referred to as the “Convention”), which is considered to have a
pro-enforcement predisposition, an arbitral award is more straightforwardly administered
throughout the world than are judgments of foreign courts of law. Even though
there has been a sizeable merging of rulebooks and practices and the
specialists in the field communicate in a collective language, those rulebooks
and practices remain detailed to each arbitral institute and to the distinctive
domestic laws prevailing the arbitration itself. Similarly, the Convention is
subject to the diverse analyses set to it in the domestic courts of law.

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3 – Juridical Theories of Arbitration

In a general standing, the compendium
of explanations regarding the essence of arbitration have been amalgamated and
classified into four distinctive theories: the jurisdictional theory, the
contractual theory, the hybrid theory (or alternatively, the mixed theory) and
the autonomous theory.

The jurisdictional theory is constructed
on the wide-ranging administrative powers of states to control any
international commercial arbitrations within their jurisdiction, whereas the
contractual theory contends that international commercial arbitration derives
from a legal arbitration agreement amongst the parties and that, consequently,
arbitration ought to be directed in accordance with the parties’ requirements.
The hybrid theory is positioned at the midpoint of the jurisdictional and
contractual theories and hence, it is a compromise between the two. It argues
that international commercial arbitration has an equally contractual and
jurisdictional personality. The autonomous theory, which has been advanced more
recently, rejects the conventional attitude and places prominence on the
purpose of international commercial arbitration as a whole. Instead of
positioning arbitration into the current legal context, the autonomous theory circumscribes
arbitration as a purely autonomous establishment, which should not be controlled
by the laws of the place of arbitration. As a consequence, parties should have unconstrained
autonomy to choose the manner in which the arbitration shall be directed.2

3.1 – The Jurisdictional Theory

The jurisdictional theory petitions
the importance of the administrative authority of states, chiefly those of the
place of arbitration. Though the jurisdictional theory does not disagree with
the notion that an arbitration derives its source within the parties’
arbitration agreement, it upholds that the legitimacy of arbitration
agreements, as well as arbitration procedures, must be controlled by national
laws and the lawfulness of an arbitral award is indicated by the laws of the
seat and the jurisdiction wherein the recognition or enforcement is requested. Advocates
of the jurisdictional theory support that all arbitration practices have to be controlled
by the rules of law selected by the parties, if there are any, and those rules
of law in force in the place of arbitration. They correspondingly deem that
arbitrators bear semblance to judiciaries of domestic courts since the
arbitrators’ authorities are consequential from the states by means of the
rules of law. Similarly, arbitrators are required to employ the rules of law of
a specific state to resolve the disputes presented to them. Additionally, the
awards prepared by the arbitrators are considered as possessing the equivalent significance
and validity as a judgment delivered by judges convening in a domestic court.
As a result, they argue that the awards will be administered by the court where
the recognition or enforcement is requested in the same way as judgments made
by the courts. Furthermore, supporters of the jurisdictional theory emphasise,
in concise terms, the importance of the seat of arbitration, namely Dr. Mann. The foundation
of Dr. Mann’s reasoning is that each self-governing state is eligible to endorse
or condemn the actions that occur in its region.3 Considering the correlation between
arbitration and the domestic courts where the arbitration is located or the
courts where recognition or enforcement of the arbitral awards is requested,
the jurisdictional theory postulates a solid foundation for the domestic courts
implementing administrative control over the arbitration proceedings.4

According to the jurisdictional
theory, the courts in the jurisdiction where recognition or enforcement is requested
similarly possess a regulatory authority throughout the matter of arbitrability
at the period of recognition or enforcement. In accordance with Article V(2) of
the Convention, the courts retain the option to reject the recognition or
enforcement of an arbitral award if it discovers that “the subject matter of
the difference is not capable of settlement by arbitration under the law of
that country”5 or
“recognition or enforcement of the award would be contrary to the public policy
of that country.”6 An
equivalent approach has similarly been embraced in the United States Supreme
Court, which established the national rule supporting arbitration in the Mitsubishi7 case. The Mitsubishi case concerned an anti-trust conflict which was barred
from being resolved via arbitration in a domestic case.  Justice Blackmun pointed out the reason as to
why The United States Supreme Court implemented the arbitration agreement
pertaining to this case: “the national courts of the United States will have
the opportunity at the award-enforcement stage to ensure that the legitimate
interest in the enforcement of the anti-trust laws has been addressed.”8
Moreover, the “Convention reserves to each signatory country the right to
refuse enforcement of an award where the recognition or enforcement of the award
would be contrary to the public policy of that country.”9
In accordance with this reasoning, it can
be asserted that the association between the courts and arbitration is
essentially regulatory, which is in line with the jurisdictional theory.10



3 Francis A. Mann, Lex Facit Arbitnim, 2(3) ARB.
INT’L 245 (1983)

4 Francis A. Mann, ‘”State Contracts and
International Arbitration”, 42 BRIT. Y.B. INT’L L. I, 10, 14, 16

5 Convention on the Recognition and Enforcement of Arbitral Awards,
Article V(2)

6 Ibid.

7 Mitsubishi Motors v Soler Chrysler-Plymouth
473 U.S. 614 (1985)

8 Ibid.

9 Ibid.

10 Ihab Amro, Recognition and
Enforcement of Foreign Arbitral Awards in Theory and in Practice: A Comparative
Study in Common Law and Civil Law Countries (1st edn, Cambridge
Scholars Publishing 2013). 

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